Don’t scorn Germany and Japan; learn from them

In the midst of the Great Recession, the United States is suffering through nearly 10% unemployment, rising inequality and poverty, 47 million people without health insurance, declining retirement prospects for the middle class and a general increase in economic insecurity. The global marketplace has become tumultuous, so when we find a bright spot, one would think it deserves a mention.

How then should we regard a country that has 5% unemployment, the lowest income inequality, healthcare for all its people and is one of the world’s leading exporters? On top of that, this country scores high on life expectancy, low on infant mortality, is at the top in math and literacy, and is low on crime, incarceration, homicides, mental illness and drug abuse, according to British researchers Richard Wilkinson and Kate Pickett in their seminal book, “The Spirit Level.” It also has a low per capita rate of carbon emissions, doing its part to reduce global warming. In all these categories, this particular country beats the United States by a country mile.

Doesn’t that sound like a country from which Americans might learn a thing or two about how to get out of the hole in which we’re stuck?

Not if that place is Japan. During and before the current economic crisis, few countries have been vilified as an economic basket case as much as the Land of the Rising Sun.

Google “Japan and its economy” and you will get many hits about Japan’s allegedly sclerotic economy, its zombie banks, its painfully slow economic growth. This week, this newspaper had an article about Japan’s incurable deflation spiral. This malaise has been called “Japan syndrome,” sounding like a disease to warn U.S. policymakers, as in “you don’t want to end up like Japan.”

No one has been more influential in defining this narrative than Nobel Prize-winning economist Paul Krugman. Throughout the 1990s, and still today, Krugman has skewered Japan’s economy and leaders. In the late 1990s, Krugman wrote a series of gloom-and-doom articles, bluntly stating in one: “The state of Japan is a scandal, an outrage, a reproach … operating far below its productive capacity, simply because its consumers and investors do not spend enough.”

But let’s look at some of the Japanese metrics during that time. Throughout the 1990s, the Japanese unemployment rate was about — ready for this? — 3%, or about half the U.S. unemployment rate at the time. During that allegedly “lost decade,” Japan also had universal healthcare, low income inequality, the highest life expectancy, low infant mortality and low rates of crime and incarceration. Americans should be so lucky as to experience a Japanese-style lost decade.

Reopening the case of Japan raises some important questions. How do economists such as Krugman decide what to value and prioritize? How do they decide what to measure? What is an economy for? To produce the prosperity, security and services that people need? Or to satisfy economists and their theories and models?

In the current debate over fiscal stimulus versus deficit reduction as the best course for economic recovery, various economists now are criticizing Germany. Krugman says Germans are not spending or consuming enough to stimulate their economy — the same criticism he has leveled at Japan.

Yet in the early 1990s, when the United States was plagued by large deficits and recession, the Clinton administration didn’t employ Krugman-type fiscal stimulus. Instead, it cut the deficit. By the end of the decade, the U.S. budget showed a sizable surplus and the economy was booming. Reality seems to defy economic theory on a frequent basis.

Japan’s economy has been and remains successful. So is Germany’s. They have reached an economic steady state in which they don’t need roaring growth rates to provide for their people. But for the economic Cassandras, apparently it doesn’t matter if people’s needs are being met; what matters is whether their theories and equations balance.

Unfortunately, there is a common-sense aspect to this that gets lost amid all the headlines. Two of the lessons of our times are that economic bubbles eventually burst, and that the environmental consequences of unbridled growth are severe. U.S.-style trickle-down economics doesn’t work anymore.

In other words, it’s no longer strictly about economic growth; it’s about sustainability and learning to do more with less. The world needs to figure out how economies can provide for their people without relying on destructive bubble-driven growth or overheating in a Venus-like atmosphere. This is not an easy challenge, yet it is the path that Japan, Germany and others have chosen. Americans would be wise to learn from them.

Steven Hill is the author of the recently published “Europe’s Promise: Why the European Way Is the Best Hope in an Insecure Age.”

A provocative, remedy-based perspective on the joint complexities of economic stability and ever expanding technology.–Kirkus Reviews

“Hill hits Silicon Valley darlings like Uber and Airbnb alongside the former online black market Silk Road, right-to-work laws, and factory robots all under the umbrella of “naked capitalism.” He explains how the rise of the “1099 workforce” is not limited to Silicon Valley; more and more traditional jobs in fields like manufacturing are turning to contractors to perform the same tasks full-time employees used to do. In addition to costing workers in benefits and safety nets, misclassifying workers as contractors costs federal and state governments billions of dollars annually in lost tax revenue.” ―Washington Monthly

“For anyone driven crazy by the faux warm and fuzzy PR of the so-called sharing economy Steven Hill’s Raw Deal: How the “Uber Economy” and Runaway Capitalism Are Screwing American Workers should be required reading… Hill is an extremely well-informed skeptic who presents a satisfyingly blistering critique of high tech’s disingenuous equating of sharing with profiteering…Hill includes two chapters listing potential solutions for the crises facing U.S. workers…Hill stresses the need for movement organizing to create a safety net strong enough to save the millions of workers currently being shafted in venture capital’s brave new world.” ―Counterpunch

“A growing underclass scrambling to make ends meet at the whim of increasingly picky and erratic employers, that number could balloon to 65 million within 10 years, or about half of the domestic workforce, warns Steven Hill in his troubling new book, Raw Deal. This brand of worker abuse cuts across industries and company size. Hill calls out Uber, AirBnb, Merck, Nissan, and dozens of others. Hill does a nice job of putting it in starker, easier-to-understand ways.” ―Washington Independent Review of Books

“Steven Hill’s book Raw Deal is a red-faced, steam-out-the-ears indictment of sharing apps. Yet Hill offers a pragmatic, almost post-ideological solution: “individual security accounts” for workers. Companies that use independent contractors, or offer scant benefits for employees, would have to add on a certain percentage of their pay as a contribution to those accounts, which would cover health care, unemployment insurance, and more. There’d be a mechanism ― and a requirement ― for companies to contribute to the long-term well-being even of workers who aren’t on their traditional payrolls.” ―Boston Globe

“Raw Deal is a book for its time. Steven Hill perfectly captures the anxiety of the American worker in today’s increasingly digital economy. Hill presents some compelling ideas, the most important being something he calls the Economic Singularity. In this unfortunate tipping point, the concentration of wealth in the hands of the few results in economic implosion because the 99 percent can’t afford to buy anything the 1 percent has to sell. The United States is turning into a nation of 1099 workers who eke out a living driving cars, renting rooms and running errands for people who apparently have better things to do with their time. Throw in self-thinking computers and obedient robots, and there won’t be any work left for plain old Homo sapiens…Hill proposes that we offer 1099 workers a new safety net consisting of tax deductions, individual security accounts and multiemployer health care plans. All good ideas.” ― San Francisco Chronicle

This book is a must read for those concerned about how technology is disrupting the way we work and eroding the social safety net, and how policy makers should respond to ensure that the growing number of workers in the “gig” economy earn adequate benefits.—Laura D’Andrea Tyson, UC-Berkeley and former Chair of the US President’s Council of Economic Advisers

“Steven Hill’s groundbreaking book on the part-time, unstable ‘Uber Economy’ shows how a new sub-economy becomes a work of law-flouting regress undermining full-time work. Remote corporate algorithms run riot!”— Ralph Nader, consumer advocate

For many years, Steven Hill’s analysis, commentary and activism have helped shape our understanding of the U.S. political economy. His latest book, Raw Deal is A riveting expose that shows with alarming lucidity what Americans stand to lose if we don’t figure out how to rein in the technological giants that are threatening the American Dream.–Katrina vanden Heuvel, editor and publisher of The Nation

In Raw Deal, Steven Hill documents in frightening detail the ways in which new forms of work promise to plunge US workers and their families into further economic hardship, risk-assumption, and instability. Fortunately, Hill does not simply anticipate catastrophe; he closes the book with an informed call for institutional reforms that would lessen the negative consequences of these potentially dangerous forms of work. Anyone concerned with US working conditions – whether American workers, worker advocates, labor market scholars, or policy-makers – must read this book .— Janet C. Gornick, Professor of Political Science and Sociology, Graduate Center, City University of New York, Director, LIS: Cross-National Data Center in Luxembourg

Praise for Expand Social Security Now

“Read this book before you vote. Few issues are more important to your personal economic future. Steven Hill shows what’s at stake, and he offers solutions that Americans of all stripes can agree on.”—Robert B. Reich, author of “Saving Capitalism: For the Many, Not the Few”

“Steven Hill has written a barn burner of a book. Or perhaps I should say ‘myth buster,’ because he systematically demolishes the false justifications for slashing Social Security. In place of misplaced animus and misleading arguments, he offers a strong case for dramatically expanding America’s most successful domestic program in an age of rising inequality and widespread financial insecurity.”—Jacob S. Hacker, coauthor of “American Amnesia: How the War on Government Led Us to Forget What Made America Prosper”, Professor, Yale University

“Steven Hill has written a vigorous defense of Social Security, the country’s most important social program. While most political debate in recent years has focused on ways to cut Social Security or privatize it, Hill goes in the opposite direction and argues for a robust expansion. Hill proposes a Social Security program that would be adequate by itself to support a middle-class retirement.”—Dean Baker, co-founder of the Center for Economic and Policy Research, and author of “Getting Back to Full Employment: A Better Bargain for Working People”

“Steven Hill has produced a dynamite handbook for angry Americans who seek to take back democracy. The true contest is not Republicans versus Democrats. It is the American people versus Washington. And this is the sleeper issue the people can win. The governing elites in both parties are trying to eviscerate Social Security—arguably the most successful and most popular program created by the federal government. Hill explains why the political insiders and their Wall Street patrons are wrong about Social Security. He shows us how to mobilize to defeat the power elites and expand Social Security rather than destroy it.”—William Greider, author of “Come Home, America: The Rise and Fall (and Redeeming Promise) of Our Country”

Praise for Europe’s Promise

Financial Times: “Steven Hill is a lucid and engaging writer. He makes you sit up and think.”

The Economist: “In a new book, Steven Hill extols the European social contract for better government services. Life in Europe is more secure, he argues, and therefore more agreeable.”

Hendrik Hertzberg, The New Yorker: “Like a reverse Alexis de Tocqueville, Steven Hill dauntlessly explores a society largely unknown to his compatriots back home.”

Andrew Moravcsik, Foreign Affairs: “Europe’s Promise is a timely and provocative book . . . the “social capitalist” policies of European countries represent best practices in handling most of the challenges modern democracies face today.”